Every iOS 8 device and Macintosh computer running OS X 10.10 you have connected to the same Apple ID and on the same WiFi network will get notified. You can also make phone calls from your iPad without cellular service over your WiFi network using your iPhone. You will no longer have to race to the charging station to answer the phone.

More about Continuity over on LaptopMag
But to ease your tension: YES, both devices need iOS8.